The Apparent and the Real Growth
Story of India
B. Yerram Raju*
There was a chorus from some
economists with former FMs joining against the transitory decline in the GDP
growth as though GDP is a strong determinant of growth. High growth and high
inflation are good friends (see the table below) and the net result has resulted
in poor becoming poorer and rich, the richer.
|
S.No.
|
Particulars
|
Average
2009-10 to
2013-14
|
2014-15
|
2015-16
|
2016-17
|
2017-18
First
quarter
|
|
1
|
Real GDP@ market prices (%change)
|
7.4
|
7.5
|
8.0
|
7.1
|
5.7
|
|
2
|
Inflation (CPI-Industrial workers) (average %change)
Wholesale price Index (average % change
|
10.3
7.1
|
6.3
1.3
|
5.6
-3.7
|
4.1
1.7
|
1.8
1.9
|
Source: RBI Annual Report 2016-17
and monthly Report September 2017.
Notwithstanding some of the good
things that NDA government has done like the laws to regulate the Real Estate
sector and the Insolvency & Bankruptcy Code, amending 87 rules for FDI in
21 sectors, abating corruption in some quarters and the GST introduction etc.,
resounding alarm has been the faulty(ed) demonetization, the GST glitches and
the enigmatic oil prices that have lost the relationship with the crude price
variations.
In the context of monetary policy
announcement there is another chorus for reduction in interest rates as though
such reduction in the backdrop of risk aversion of the banks due to the
unrelenting NPAs would kick start fresh demand for credit. All the rate cuts
thus far failed to result in any fresh credit or a pass through to the existing
clients to spur demand. It is doubtful that RBI would have the luxury of
another rate cut in the emerging economic uncertainties and falling rupee on
the Forex front. Stock markets became nervous with the global undercurrents of
rising unrest between North Korea and USA.
While demonetisation set in a
trail that closed the a lakh and odd shell companies and disqualified 3lakh
directors apart from around Rs.30000cr tax evasion, GST is in the process of
bringing in better tax compliance. Going by global experience, GST will take a
minimum of two years to stabilise. However, what the GST missed out is a big
worry: skipping the petrol, diesel and trade in waste and scrap. A rough
estimate says that the city of Mumbai alone has a turnover of Rs.1trn a year in
waste and scrap. Huge black money hides here because all deals are in cash even
now.
Rising fiscal deficit is another
major concern. The States in the emerging political context and certain states
by habit have been indulging in distributive justice without productive gains.
Gujarat elections are a case in instance where the insurance companies against
no fall in agriculture production are in line for responding to unsustainable
claim settlements under PMBY.
In addition dragging farm sector
despite good monsoon, education and health sectors are the other bigger causes
for the present imbroglio in the economy.
Pragmatic government would have
started addressing more worrisome issues like the rising unemployment and
declining manufacturing, certainly not as a consequence of the reforms but as a
cause.
Nation with more young population
in the backdrop of consistent unemployment rate of 7-8% during the last three
years is also facing the rising aged working population with bulging demand for
high pension budget. NSSO 2011-12 Employment Survey – the one quoted by NITI
Aayog in its Vision 2017-20 – admits to 51% of the workforce employed in
manufacture and services, contributing to 83% share in the economy.
The Vision Document failed to
make MSMEs the centre of manufacturing and employment growth. MUDRA should move to targeting micro manufacturing
enterprises in the ‘Tarun’ window. A crore of Rupees investment in
manufacturing MSEs would give rise to average of six persons while six crore
rupees in medium and six hundred crores in large enterprises would give rise to
employing no more than ten and a couple of hundreds respectively. Its emphasis
on the high-productivity high-wage jobs in the large industry sector is
misplaced while its focus on infrastructure investment is laudable.
Before any strategic corrective
interventions are made, the government must listen to dissenting voices both
from within and outside. While fresh investments in infrastructure like Rail,
Road and Ports are welcome, corrections to the failed infrastructure would
require less investments if the Industrial Estates of the yester-era do not
turn into havens of real estate instead of manufacturing hubs.
If the next budget typically
focuses on elections and fails to provide the much needed investments in
education, safe drinking water, health and bolstering manufacturing sector
realising that the Make-in-India and Start-Up India remained as slogans both
the economy and the NDA are going to witness a decent burial. If every citizen
in the country can get safe drinking water health budget of the poor would come
down by 70-80 percent. This should be the next mission of the Government.
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